from the pesky-international-obligations dept

In this year's Special 301 report, the United States Trade Representative listed Ukraine as a "Priority Foreign Country" (aka PFC), triggering a 30 day countdown to initiate an investigation under Section 301 of the Trade Act to determine trade sanctions. 19 USC 2412(2)(A). This is only the second time that the U.S. has threatened a WTO-member country with sanctions as a PFC. And thus it is an appropriate time to ask what restrictions the World Trade Organization places on the operation of the Special 301 program. As described more fully below, any sanction of Ukraine, including removal of General System of Preferences (GSP) benefits, would likely violate WTO rules. Indeed, the listing of Ukraine as a PFC, and the more general operation of "watch lists" threatening sanctions for intellectual property matters, could be challenged under the WTO even prior to any sanction actually going into effect.

Special 301 is a Unilateral Adjudication of Foreign Countries for IP Matters both Covered and not Covered Under any Trade Agreement

Special 301 is an offshoot of the more general "Section 301" program which authorizes the USTR to unilaterally sanction foreign countries for a domestic law which either "violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement" or which does not itself violate any agreement but nevertheless "is unreasonable or discriminatory and burdens or restricts United States commerce." 19 USC § 2411. One ground for finding an "unreasonable" policy subject to trade sanction includes the denial of "fair and equitable . . . provision of adequate and effective protection of intellectual property rights notwithstanding the fact that the foreign country may be in compliance with the specific obligations of the Agreement on Trade-Related Aspects of Intellectual Property Rights." 19 USC 2411(d)(3)(VB)(ii). Possible sanctions can include the suspension of "benefits of trade agreement concessions," "duties or other import restrictions," or the suspension of General System of Preferences (GSP) benefits. 19 USC 2411(c).

Special 301 is integrated into the Section 301 sanctioning process through a public adjudication and notification mechanism. Under Special 301, the USTR is required to annually publish in the Federal Register a list of countries that deny "adequate and effective protection of intellectual property" or "deny fair and equitable market access for U.S. firms that rely on intellectual property," and then designate among those countries the subset of worst actors to be designated "priority foreign countries." 19 U.S.C. § 2242. USTR holds an annual hearing and publishes an annual report containing two levels of "Watch Lists" below the "Priority Foreign Country" designation. As described by USTR in the 2013 report:

Placement of a trading partner on the Priority Watch List or Watch List indicates that particular problems exist in that country with respect to IPR protection, enforcement, or market access for persons relying on IPR. Countries placed on the Priority Watch List are the focus of increased bilateral attention concerning the problem areas.

Designation as a "Priority Foreign Country" is a statutory criteria that triggers a 30-day countdown during which targeted countries must "(enter) into good faith negotiations" or "(make) significant progress in bilateral or multilateral negotiations" or face an investigation under the Section 301 process for determining unilateral sanctions. Priority foreign country determinations are reserved for countries "that have the most onerous or egregious acts, policies, or practices," that "have the greatest adverse impact (actual or potential) on the relevant United States products," and for which "there is a factual basis for the denial of fair and equitable market access as a result."

This framework for unilaterally sanctioning foreign countries for intellectual property matters pre-dates the World Trade Organization's rules. Indeed, it was the lack of binding international trade adjudication, such as that created under the WTO, that was the primary justification for Congress's enactment of the 301 unilateral adjudication in the 1980s. [See 301 Historical Primer]. There has always been a serious question as to how the statutory program could continue after the WTO, and there has been one adjudication of the more general 301 program explained below.

One of the noticeable trends in Special 301 in the Post-WTO 1994 period is the steep drop off in listings of countries as a "Priority Foreign Country," most directly threatening trade sanctions. Only three countries were designated as PFCs after 1994: China in 1996, Paraguay in 1998, and Ukraine in 2001-05. Of these, only Paraguay was a member of the WTO in the year it was listed as a PFC. Ukraine was not a WTO member when it was initially listed, but now it is.

Using 301 to Adjudicate TRIPS Violations Would Violate the WTO Dispute Settlement Understanding and U.S. Law

On their face, the 301 complaints against Ukraine do not appear to raise challenges to Ukraine's implementation of the WTO agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The 2013 Special 301 Report describes three grounds for Ukraine's PFC listing:

[T]he specific grounds for the U.S. Trade Representative’s designation of Ukraine as a PFC are: (1) the unfair, nontransparent administration of the system for collecting societies, which are responsible for collecting and distributing royalties to U.S. and other rights holders; (2) widespread (and admitted) use of illegal software by Ukrainian government agencies; and (3) failure to implement an effective means to combat the widespread online infringement of copyright and related rights in Ukraine, including the lack of transparent and predictable provisions on intermediary liability and liability for third parties that facilitate piracy, limitations on such liability for Internet Service Providers (ISPs), and enforcement of takedown notices for infringing online content.

None of these grounds explicitly refer to complaints under TRIPS. Unilateral adjudication of TRIPS violations is prohibited by Article 23 of the Dispute Settlement Understanding, explaining under the title "Strengthening of the Multilateral System":

1. When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding.

2. In such cases, Members shall:

(a) not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding

The import of this language is fairly clear. The Dispute Settlement Understanding (DSU) procedures, and only those procedures, can be used for findings that lead to the "suspension of concessions or other obligations" under GATT.

After the WTO accords went into effect, the U.S. did not dismantle the Section 301 or Special 301 programs, which became the subject of a trade dispute in the WTO in United States – Sections 301-310. In that case, a WTO panel held that Section 301 sanctions were only still legal under the DSU because of a "Statement of Administrative Action" pledging to "base any section 301 determination" on "panel or Appellate Body findings adopted by the DSB" and only sanction countries with "authority from the DSB to retaliate."

The panel decision went further, discussing in a key package that the U.S. also could not threaten to sanction countries in ways that, if actually implemented, would likewise threaten the WTO:

Members faced with a threat of unilateral action, especially when it emanates from an economically powerful Member, may in effect be forced to give in to the demands imposed by the Member exerting the threat... To put it differently, merely carrying a big stick is, in many cases, as effective a means to having one's way as actually using the stick. The threat alone of conduct prohibited by the WTO would enable the Member concerned to exert undue leverage on other Members. It would disrupt the very stability and equilibrium which multilateral dispute resolution was meant to foster and consequently establish, namely equal protection of both large and small, powerful and less powerful Members through the consistent application of a set of rules and procedures.

After this ruling, the USTR has been relatively carefully not to use Special 301 to explicitly threaten other countries with trade sanctions for alleged violations of TRIPS. It more commonly describes Special 301 as being a component of the evaluation of whether it will grant other countries GSP benefits, which it asserts unilateral authority to determine the criteria for. And the criteria listed in the 301 reports most commonly refers to the lack of domestic policies that are "TRIPS-plus" -- i.e. go be beyond those required by the TRIPS agreement. But, as explained below, the developed countries do NOT have unilateral authority to determine GSP benefit criteria. Under the reasoning of the Sections 301-310 panel, any country on the various Special 301 Watch Lists would likely have standing to challenge the Special 301 program as threatening denial of GSP benefits for criteria that violate the WTO accords.

TRIPS-Plus standards may be challenged as not being "non-discriminatory" and "non-reciprocal" criteria tailored to "respond positively to the development, financial and trade needs of developing countries."

The U.S. legal authority for denying GSP benefits based on intellectual property policies is contained in 19 USC 2462(c), requiring consideration of the "the extent to which such country is providing adequate and effective protection of intellectual property rights." The 2013 Special 301 report signals that it intends to evoke this criteria with respect to Ukraine, stating:

When Ukraine was designated a PFC in the past, it failed to address the grounds for its designation during the following investigation. As a result, Ukraine lost its eligibility for benefits under the Generalized System of Preferences (GSP). Once Ukraine addressed the issues that led to its designation as a PFC, its eligibility for GSP benefits was reinstated.

Thus, the central question under the WTO accords may be: may the U.S. suspend GSP benefits from a country as a sanction for not adopting TRIPS-plus policies? Current law under the WTO Appellate Body provides a strong argument that the U.S. cannot maintain such policies.

The starting point for the trade law analysis is the WTO's requirement of Most Favored Nation (MFN) treatment for all members, contained in Article I:1 of the General Agreement on Tariffs and Trade 1994 (GATT). The MFN principle requires

any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country be accorded immediately and unconditionally to the like product originating in or destined for territories of all other contracting parties

By withdrawing trade benefits from one country (e.g. Ukraine), but not from other WTO-members, the U.S. GSP program facially authorizes conduct that violates MFN treatment. The conduct must, therefore, be authorized by an exemption to MFN.

GSP programs are authorized by the exception to MFN known as the GSP "Enabling Clause." The two key provisions in this clause for our purposes are located in Paragraphs 2 and 3. Paragraph 2 (footnote 3) of the Clause states that GSP programs are authorized only in so far as their criteria are "generalized, non-reciprocal and non discriminatory." Paragraph 3 of the Clause adds the additional requirement that GSP criteria "be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries." The use of TRIPS-plus criteria to deny GSP benefits does not appear to meet either standard.

The WTO Appellate Body (the highest court in the WTO and the authority on matters of WTO interpretation) was tasked with interpreting the GSP enabling clause requirements in the case of EC -- Preferential Tariffs. The matter involved a challenge by India of the EC's program to award additional GSP benefits to countries that participated in a special drug eradication program. The Appellate Body held that GSP programs could have criteria that result in different benefits being afforded to different developing countries, but that such differential treatment must itself be based on criteria that meet the Paragraph 3 requirement of responding "positively to the development, financial and trade needs of developing countries." The Appellate Body explained:

In granting such differential tariff treatment, [ ] preference-granting countries are required, by virtue of the term “nondiscriminatory”, to ensure that identical treatment is available to all similarly-situated GSP beneficiaries, that is, to all GSP beneficiaries that have the “development, financial and trade needs” to which the treatment in question is intended to respond.

The Appellate Body continued:

[T]he expectation that developed countries will “respond positively” to the “needs of developing countries” suggests that a sufficient nexus should exist between, on the one hand, the preferential treatment provided under the respective measure authorized by paragraph 2, and, on the other hand, the likelihood of alleviating the relevant “development, financial [or] trade need”. In the context of a GSP scheme, the particular need at issue must, by its nature, be such that it can be effectively addressed through tariff preferences. Therefore, only if a preference-granting country acts in the “positive” manner suggested, in “respon[se]” to a widely-recognized “development, financial [or] trade need”, can such action satisfy the requirements of paragraph 3(c).

Under this standard, TRIPS-plus criteria may be challenged for being insufficiently related to the needs of developing countries and rather tailored to meet U.S. intellectual property industry export needs. The U.S. is not free to define any "needs" it chooses as GSP criteria for developing countries. The Appellate Body admonished that "a 'need' cannot be characterized as one of the specified "needs of developing countries" in the sense of paragraph 3(c) based merely on an assertion to that effect by, for instance, a preference-granting country or a beneficiary country." Such need, the Appellate Body held, must be assessed according to an "objective," "[b]road-based recognition of a particular need," such as those "set out in the WTO Agreement or in multilateral instruments adopted by international organizations."

Here, the U.S. is on the horns of a dilemma. For the criteria to be sufficiently "broad based," the WTO Appellate Body suggests that they need to be incorporated into a broad multilateral agreement like TRIPS. But the U.S. cannot unilaterally adjudicate TRIPS disputes.

The specific issues that the U.S. raises -- the administration of collecting societies, rules on the government use of copyrighted software, and intermediary liability and "enforcement of takedown notices for infringing online content" -- are not subject to broad-based international standards. None are explicitly recognized duties under TRIPS. There are very general standards in the WIPO Internet Treaties on copyright in the digital environment, but only a small number of controversial international agreements -- in the form of bilateral trade agreements with the U.S. -- contain standards on intermediary and third party liability and the enforcement of takedown notices for online infringement. The U.S. would like these to be areas of broad-based agreement, but thus far they are not.

Ukraine may also argue that using removals of GSP benefits as a sanction for disfavored policies and practices is not a "positive" use of GSP benefits. The Appellate body explained that the GSP Enabling Clause "mandates that the response provided to the needs of developing countries be 'positive,'" which it defined as "consisting in or characterized by constructive action or attitudes." It continued:

This suggests that the response of a preference-granting country must be taken with a view to improving the development, financial or trade situation of a beneficiary country, based on the particular need at issue.

It is difficult to explain the use of PFC listings under Special 301 as "positive" in this respect. The PFC listing is rather clearly designed as a threat to withdraw benefits as a punitive sanction for acting against U.S. interests, not as an enticement or reward for responding to its own development needs. As one commenter noted: "The EC rewards "good" behavior with extra preferences; the U.S. penalizes "bad" behavior by taking away preferences." Whether the WTO allows the latter use of GSP criteria as a sanction is yet to be decided by the Appellate Body.

Conclusion

The implications of the two lines of cases discussed above suggest that Ukraine has strong arguments for challenging its PFC listing, and any subsequent denial of GSP benefits, in the WTO. In addition, using the discussion of the prohibition of "threats alone" from the Section 301-310 case, other countries on the various watch lists could challenge Special 301 as implicitly threatening GSP benefit withdrawal for criteria that do not meet the WTO’s standards. Doing so and succeeding would relieve the world of a much hated vestige of the Pre-WTO "aggressive unilateralism" in U.S. trade policy.

Sean Flynn is a professor and associate director of the Program on Information Justice and Intellectual Property (PIJIP) at American University Washington College of Law.

from the once-a-maximalist,-always-a-maximalist dept

Here on Techdirt we often talk about the copyright ratchet -- the fact that for three hundred years changes to copyright have always been in one direction: longer, wider and stronger. But there's a group of countries where the copyright ratchet isn't in place yet. These are the so-called LDCs -- the Least Developed Countries -- where many of the world's poorest citizens live. That's because the main Agreement on Trade Related Aspects of Intellectual Property Rights, better known as TRIPS, explicitly allows LDCs a transitional period of ten years, during which time they are not required to meet all the stringent requirements laid down there for granting intellectual monopolies. Moreover, the TRIPS agreement specifies:

The Council for TRIPS shall, upon duly motivated request by a least-developed country Member, accord extensions of this period.

Last November the LDCs exercised their legal rights under the TRIPS rules, and submitted a request to the TRIPS Council requesting an unconditional extension of the transition period for as long as a country remains an LDC. The current transition period expires on 1 July 2013.

Article 66.1 of the TRIPS Agreement grants LDCs a renewable exemption from TRIPS obligations. The rationale is that LDCs need maximum flexibility to develop a viable technological base and address their constraints, and that the standard of TRIPS IP protection may be an obstacle in achieving those objectives.

The US and EU routinely insist that countries follow TRIPS to the letter, but it seems they are only too happy to ignore their own obligations when it comes to granting a further exemption to LDCs:

Developed countries, particularly the United States and the European Union, have offered a poor and impractical deal of an incredibly short extension of 5 years with restrictive conditions to least developed countries that are entitled to be exempted from implementing the WTO TRIPS Agreement.

Particularly problematic is their demand that the LDCs agree to a "no-roll-back" clause, a TRIPS plus condition that will prevent LDCs from rolling back (i.e. providing a reduced degree of IP protection) their current laws, even if they adversely impact their development concerns.

The US and EU demand, if agreed to, would actually amount to an amendment to Article 66.1, but without following proper WTO procedures as required by Article X of the WTO Agreement

That is, the US and EU are not only trying to bully smaller countries into accepting unofficial changes to negotiated agreements, in this case to lock LDCs into a system with a built-in ratchet for intellectual monopolies, but they want the upward ratchet to operate on TRIPS itself.

from the pigeons-are-delicious dept

Update: As pointed out in the comments... this is a hoax. The video is real, but the translation is made up for the sake of comedy value. Considering that Monday is April Fool's Day, where a bunch of people are going to be trying to fool others, let's just consider this a "lesson learned" and hope that we're not repeating this message again on April Fool's posts... Original post below...

I find myself in the peculiar position of having to congratulate one of my old nemeses in writing for Techdirt, North Korea. I would have thought, after having described their previous attempts at producing propaganda videos, one of which included Elder Scrolls music and the other Call Of Duty footage, that they had exhausted the human limits for laugh-inducing hilarity. As it turns out, if I'm to believe the translator of the following video, these were merely warm up acts for the true star of North Korean humor, which details daily life in America.

Now, should a mere YouTube video reach the limits of your workplace's filtering device, or that of your country, allow me to present to you some of the things I learned about my own life thanks to this wonderfully produced video.

1. All of America is covered in snow, which is a good thing because apparently all American coffee is somehow made from snow.

2. Americans, by and large, live in tents and spend all of our money buying guns to kill children.

3. There are no longer birds in America, because they have all been eaten by the gun-toting tent-dwellers.

4. It is common in modern-day America for our tents to have caved in roofs (?), but we are still proud of our tents, as well as our Green Bay Packers Starter jackets.

5. Before we stray away from our tents, note that all of them are built with supplies donated to us by North Korea.

6. Before we stray away from our propensity to eat birds, note that the most common day for the eating of birds is Tuesday.

7. Homeless people, in general, are former Republican candidates from Oregon.

8. America is very grateful to our government for the 1 cup of snow-coffee handout we all receive daily, after which we resume bird-eating and child-killing activities.

Now, should you be of the same mind as I in that you're beginning to wonder why you can't recall all of these moments in your daily life, it is useful to remember that North Korea is a country which has a dead person as its President. This is not an exaggeration. As you can see for yourself, while Kim Jong-un is indeed the country's First Chairman, neither he nor his father ever held the office of President of North Korea. That position was, and to this day is, filled by Jong-un's grandfather, Kim Il-sung, who has been dead for nearly two decades, but holds the office of "Eternal President".

I submit that no amount of pigeon-eating or tent-dwelling can hold a candle the level of crazy required to have a zombie President.

from the good-for-the-goose dept

Even as the US tries to ratchet up patents, copyrights and trademarks in international trade agreements, talking about how it's essential to protect the US's interests, it's amazing how the US ignores those same agreements at home. For years, we've talked about the still ongoing situation with Antigua, where the US was clearly found in violation of trade agreements, but has refused to do anything about it (other than unilatterally changing the free trade agreement in question in its own favor).

But that's just the tip of the iceberg.

Other countries are complaining that the US has lost at a variety of hearings in front of the WTO (handling disputes over those trade agreements) and then proceeded to ignore those rulings entirely.

“The conduct of the United States unscrupulously discredits the WTO dispute settlement system and also constitutes an affront to the intellectual property rights,” an ambassador from Cuba said today at the WTO.

At a WTO Dispute Settlement Body meeting today, a number of WTO members fired shots at the US delegation for its continued failure to change its laws to comply with WTO rulings that found it out of compliance on intellectual property-related issues.

The article lists out a bunch of countries all complaining that, while the US keeps pressuring them to adopt strict IP laws, the US routinely ignores the same clauses in the various free trade agreements it signs.

“It is very ironic to observe the United States projecting laws on intellectual property, despite keeping violations as egregious as Section 211,” under which the Bacardi Company continues to market rum labelled Havana Club, a mark which is otherwise owned by Cuba and partners. “This is one of the most famous cases of trademark counterfeiting and conducting misleading advertising by a company backed by the US legislation.”

And while a number of the countries complaining obviously have other issues with the US (Cuba, Venezuela), it's not just those countries. The EU also has complained that the US has been ignoring various agreements.

Even the 27-member European Union weighed in on the Section 211 case, thanking the US for its report and adding the hope that “US authorities will very soon take steps towards implementing the DSB ruling and resolve this matter.” The EU also urged that the US comply with another IP case – Section 110(5) of the US Copyright Act – which involved the US commercial practice of playing music recordings, such as Irish music, aloud in bars without paying royalties. “We refer to our previous statements that we would like to resolve this case as soon as possible,” the EU said.

Of course, the proper response to all of this isn't just putting more pressure on the US to change its laws to comply, but a more basic solution: stop agreeing to "intellectual property" issues in trade agreements. The US has now made it abundantly clear that it will pressure countries into rules that go against its own best interests and then will ignore any rules that go against its own interests. So the most basic response is that the US is clearly not trustworthy on "intellectual property" in trade agreements, and other countries should refuse to include such provisions in any agreement with the US. Don't reward hypocrisy and bullying by allowing the US to do more of the same.

from the all-in-it-together dept

As Mike noted a couple of days ago, international trade agreements often have the effect of constraining the power of national legislatures. Indeed, that's doubtless one of the reasons why they have become so popular in recent years: they allow backroom deals between politicians and lobbyists to set the agenda for law-making around the world, without the need for any of that pesky democratic oversight nonsense. In particular, the trade agreement between South Korea and the US is turning out to be a key limiting factor for both TPP and what US politicians might try to do about phone unlocking. This makes two recent moves to loosen South Korea's harsh copyright laws potentially important far beyond that country's borders.

Introduction of comprehensive and open-ended fair use provisions in the Copyright Act;

Legislation of users' right capable of offsetting abusive enforcement of copyright;

Guaranteeing the reuse and access of the general public to publicly-funded information and culture;

Balanced harmony of intellectual property and the right to culture and information;

These might seem mild enough, but against the current background they are likely to be seen as quite radical in giving more rights to the public, for a change. The commission also calls for South Korea's existing implementation of the three-strikes approach to be reconsidered and, if necessary, repealed:

Regulations such as copyright three-strike-out rules, technological protection measures, and game shut-down, the regulatory effectiveness of which is doubtable and may restrict the right to culture and information, need to be examined in depth to see if they infringe other constitutional rights and, if necessary, such regulations are to be revoked.

On March 24, 2013, Mr. Choi Jae-Cheon, a member of the Culture, Broadcasting, and Tourism Standing Committee of the Korean National Assembly, along with other twelve other sponsors, announced his proposal to repeal this provision of the law, which has been in force since 2009.

The problem, as is so often the case with copyright, is that the law has turned into a monster, suffering function creep and leading to disproportionate punishments. Global Voices explains:

Since the law was enacted, the Korean government has sent 468,446 takedown notices to users and shut down 408 website accounts. The law has affected far more users than it was originally intended to -- it was passed with the goal of targeting users engaging in massive amounts of illegal downloading, estimated at about 1,000 users. But in fact, according to Mr. Choi's investigation based on his team's collected data from MCST [Korea's Ministry of Culture, Sports, and Tourism], among 380 users whose accounts have been shut down, 174 (45.8%) of them inflicted damages of less than US$.90. Mr. Choi argues that their punishment, which constrains their right of access to information, is much harsher than the cost they incurred. Therefore, the law not only violates legal due process -- it is also inefficient from an economic perspective, and it imposes a punishment that is disproportionate to the crime.

According to the same article, this is no mere one-off action, but part of a broader reform movement in South Korea:

This and other Internet-related policies have brought together professors and activists who are forming new non-profit organizations focused on Internet rights. This emerging public coalition shows a promising sign of a new counter-force against state-guided Internet and communication policy making processes in South Korea.

That would be a hugely welcome development, which might help to bring some much-needed balance into the nation's copyright laws. And just as bad, one-sided copyright laws in one country can adversely affect the public elsewhere through trade agreements, let's hope that good, proportionate ones -- if we ever get them -- can be equally far-reaching.

from the interesting-geography dept

Last week we wrote about the important news that Mexico is asking to join what began as a bilateral trade agreement between the US and Europe, with the suggestion that Canada might follow suit. Now, via @FFII, we learn that even before Mexico's announcement, the US has been encouraging other countries to join:

Turkish Foreign Minister Ahmet Davutoglu said Wednesday US Secretary of State John Kerry wanted Turkey to be included in Transatlantic Free-Trade Area (TAFTA).

Davutoglu said they would follow closely the process of Turkey's inclusion in TAFTA.

As with Mexico's application, it would seem that the European Union doesn't get any choice in the matter. But what's really interesting here is that it confirms the impression that the US is keen to build out TAFTA to include many more countries, including some far from the Atlantic that originally defined it. The big question is now: who's next on the list?

from the really-getting-serious dept

Things are moving fast with the proposed US-EU transatlantic free trade agreement (TAFTA). It was only a few weeks ago that the formal announcement was made, and already another country wants to join, as pointed out by @PostActa (original in Spanish):

The Mexican government wants to be part of the negotiations of the Transatlantic Association of Trade and Investment (TTIP, in its English acronym), which the United States and European Union will be negotiating, with the idea that there will be two blocks that make up the future pact.

That is, alongside the EU block of 27 countries, Mexico is suggesting there should be a similar regional grouping in North America. Interestingly, the story says that the Mexican government will ask the US President for permission to join, with no mention of asking the EU:

"It is a sovereign decision of Washington as to the approach and the negotiation strategy to be adopted", and although the U.S. government has already referred to the idea, it is something that is not yet included in a formal dialogue, and needs to be defined.

That suggests that the US is actively involved in this latest move -- maybe even its instigator -- and would look favorably on Mexico joining TAFTA. There's also a hint in the article quoted above that Canada too might join TAFTA. Having both Mexico and Canada on board would be consistent with the US's past approach, where it allowed them to join the TPP negotiations, but on fairly humiliating terms that limit their scope of action.

Whether or not Mexico and Canada become part of TAFTA, and under what terms, it's pretty clear what the US strategy here is. Just today we learned that South Korea is likely to join Japan in asking to sign up to the TPP talks. That would make TPP the defining international agreement for the entire Pacific region. TAFTA obviously aims to do the same for the Atlantic. As well as establishing the US as the key link between the giant TPP and TAFTA blocs, this double-headed approach would also isolate the main emerging economies -- Brazil, Russia, India and above all China -- if they refuse to join as presumably junior partners. That globe-spanning pair of trade pacts, it would seem, are what Obama hopes to be remembered for when he leaves office: his legacy to America -- and to history.

from the well,-look-at-that dept

These days, it's become quite common to talk about the importance of spreading copyright maximalism around the globe based on the US's interests. After all, the US seems to be the leading country in pushing for such maximalism, and people often talk about the big copyright players and their lobbyists, as being US-centric. After all, there's Hollywood for movies, NY for publishing and NY/LA/Nashville for music. And, so much activity seems to be driven by their lobbyists -- mostly the RIAA and MPAA. However, a new study is pointing out, for all this talk of the "American entertainment industry" driving the discussion on copyright laws, that a very, very large number of these companies are actually foreign, and much of the industry is really foreign (pdf). There's a nice infographic to go along with the report as well:

The paper starts out by questioning a key assumption that is made frequently, by calling out a specific statement by IP Czar Victoria Espinel:

Americans are global leaders in the production of creative and innovative services and products, including digital content, many of which are dependent on the protection of intellectual property rights.

The paper notes that many have challenged whether or not those industries are truly "dependent" on intellectual property laws, but few have explored whether or not those industries are really "American." Turns out... they're not. And, as such, if we're making policy based on just propping up the few legacy companies who run those industries, we're often funneling US money to foreign countries, rather than investing it in the US. Among the findings (many of which are in the graphic above):

Four of the "Big Six" publishers (who represent a huge percentage of English-language book publications) are foreign-owned. More than 80% of the revenue made by the Big Six goes to foreign-owned companies.

Only 7 of the world's top 50 publishers are US-owned.

The book publishing business in Europe employs twice as many people as the US

Two of the three major record labels are foreign-owned. Those two labels represent nearly 60% of the market.

13 out of the 20 best-selling artists are not American.

Half of the 50 most popular movies in the US in 2012 were filmed partly or entirely outside the US.

Over the last two years, half of all Oscar winners were foreign.

The video game market is dominated by Japanese firms, with 70% of the market for the most recent generation coming from Japan

The report finds that this carries over to the patent side as well.

Foreign companies obtained 7,000 more US patents than US companies in 2011 (likely a bigger gap in 2012)

Seven of the top 10 companies getting US patents were foreign in both 2011 and 2012.

Nearly 60% of pharmaceutical revenue is generated by foreign-owned companies.

The majority of employees in the pharma industry (including for US-owned firms) work outside the US.

Basically, the more you look, the more you realize that even with all this talk of how we need these laws to protect US interests, a significant amount of any benefits may actually be flowing right out of the country.

from the a-little-history-lesson dept

Missed this when it first came out, but Bloomberg ran a fantastic report at the beginning of February, highlighting how piracy and fraud were key components to helping America catapult into the industrial revolution. In fact, there are reasonable arguments to be made that if the US was not a "pirate" nation, it would not have had the kind of success that it has had as the industrial world leader. We've discussed some of this in the past, and have highlighted how Eric Schiff's research showed how other countries (the Netherlands and Switzerland) industrialized by explicitly rejecting patents. The US didn't go that far, but it did involve quite frequent copying of the efforts of others and then improving on them, without fear of repercussions.

In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.

This is a point we've made many times as well. Patent and copyright system supporters frequently argue that stronger laws are needed to create incentives for creation and innovation. But, there are a ton of studies that show the actual pattern runs the other way. When you look at the pace of innovation before and after a change to patent laws, or if you do cross-country comparisons at the same time for similar types of economies, you quickly see that those with weaker laws show more innovation. The ratcheting up of patents is rarely about increasing incentives to innovate. Patents are put in place with the support of incumbents, knowing that it allows them to "exclude" competitors and upstarts. It is not a tool of innovation, but a tool to suppress disruptive innovation. Not having those laws (or having them widely ignored) leads to a situation in which people continually improve what's out there -- which is how the US economy took over the world during the industrial revolution.

The most candid mission statement in this regard was Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in December 1791. “To procure all such machines as are known in any part of Europe can only require a proper provision and due pains,” Hamilton wrote. “The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms.”

Notice that Hamilton wasn’t urging the development of indigenous inventions to compete with Europe but rather the direct procurement of European technologies through “proper provision and due pains” -- meaning, breaking the laws of other countries. As the report acknowledged, most manufacturing nations “prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.” At least part of the “Report on Manufactures” can therefore be read as a manifesto calling for state-sponsored theft and smuggling.

In fact, as the article notes, our own original Patent Act recognized this very fact, by refusing to cover foreign inventions.

Of course, the idea that loose patent and copryight laws can help nations develop economically is not a new idea. Over a decade ago, we were writing about how various officials were admitting that strong IP laws probably did more harm than good for developing nations. And, yet, the US continues to try to push its extreme maximalism for copyright and patent laws around the globe. Either they are doing this out of ignorance (a real possibility) or because they actually understand the truth, which is that other countries with IP laws like the ones in the US will see a slow down in their economic development.

Either way, those who insist that the US was founded on the principles of strong respect for "intellectual property" haven't paid that much attention to the actual history of American industrialization.

from the why? dept

The story of ACTA is well-known by now. ACTA was yet another attempt by copyright and patent maximalists to spread maximalist principles further via a secretive treaty that allowed certain industries to participate in the process, but kept out any and all concerns from public interest groups, the public itself, and innovative industries that would be harmed by the laws. Thankfully, widespread protests in the EU resulted in ACTA being declared dead there, as the EU Parliament refused to agree to ACTA. And, without the EU, it's questionable if ACTA will ever be a real treaty in any way that matters. Yes, some countries have signed it, but there are still some ratification processes necessary, and without the EU on board, the whole thing seems kind of pointless. Other negotiating countries, including Switzerland, Australia and Mexico have indicated that they are not fans of ACTA either.

Many assumed, therefore, that ACTA was dead. But... not the US apparently. Nor Canada. In an announcement today, the USTR is apparently acting as if the months of ACTA protests and the death of ACTA in Europe didn't happen. Instead, it's all about pressuring countries like Canada by claiming that they need "to meet its Anti-Counterfeiting Trade Agreement obligations." Seriously, now?

Now, if I'm a Canadian politician, this is the point where I tell the USTR to go pound sand and to recognize that the world has clearly rejected the concept of ACTA, and having just gone through a long and arduous copyright reform process (also mainly because of US demands from the likes of the USTR), that the USTR should go pick on some other country to bully.

The core elements of the bill include the increased criminalization of copyright and trademark law as well as the introduction of new powers for Canadian border guards to detain shipments and work actively with rights holders to seize and destroy goods without court oversight or involvement.

It's really amazing that they're willing to open this can of worms, given just how strongly people fought back against ACTA elsewhere. Michael Geist has a good initial analysis of the bill at the link above, and will likely follow up to call out some more specifics in the 52 pages of changes to copyright and trademark law, but just the fact that Canada is bothering to move forward on this is troubling. It shows a Canadian government who doesn't seem to care about what the public wants, but rather feels the need to kowtow to US entertainment and pharmaceutical lobbying interests.

The
first is that this bill provides a clear signal that Canada will
move forward with ACTA notwithstanding some doubts over whether
there is even sufficient global support to allow it to take effect
(six ratifications are needed). ACTA is toxic in Europe, where
officials now go out of their way to assure the public that ACTA
is dead and that any new agreements will not involve efforts to
revive it. ACTA has also faced serious opposition in other
negotiating countries, including Switzerland (which
has not signed it), Australia (where a Parliamentary
Committee recommended
against ratification), and Mexico (where the Senate
rejected it in 2010). ACTA was promoted as a "gold standard"
agreement on counterfeiting, yet the failure to garner support
from many participants has left an agreement that is often cited
as an example of how not to engage in international
negotiations. Given the global opposition, Canadian support
for ACTA is disappointing.

For many years, Canada has strongly resisted US-style copyright laws, despite tremendous pressure to do so. Watching them cave on ACTA is certainly a disappointment. Meanwhile, watching the USTR pretending as if ACTA went forward as planned is simply par for the course, and a reminder of just how completely detached from reality that organization remains. Elsewhere in the USTR's agenda release today, it mentions working with Japan to bring ACTA into force, which is somewhat laughable, considering how many countries have been rejecting it.